IN BRIEF:

'RBI likely to start hiking rates by April 2010'

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New Delhi, Sep 28 (PTI):,

Sep 28 2009, 18:19pm ist

updated: Sep 28 2009, 18:19pm ist

"Headline inflation is now rising, inflation momentum is notably picking up the most in India ... Korea is still likely to hike first in Q1, 2010, followed by India and Singapore by April 2010," Citi economist Anushka Shah said in a note.

Food accounts for 57 per cent in CPI and 14 per cent in WPI.Going forward, she expects prices to stay firm though improved pulse production and high foodgrain stocks could be mitigating factors.

The headline WPI is likely to rise to 5 per cent levels by December, she said.

"We expect RBI to begin its policy tightening cycle in 2010 and expect 125 bps of cumulative hikes in 2010. This would take the repo and reverse repo rate to 6 per cent and 4.50 per cent respectively, by the end of 2010," she said.

Currently, the repo rate (rate at which RBI lends to banks) is 4.75 per cent and the reverse repo rate (at which RBI borrows from banks) is 3.25 per cent.

Since October 2008, RBI slashed 425 bps in repo rate and 175 bps in reverse repo."Key factors to watch out for on this front are trends in credit and non-oil import growth," she added.

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